Author(s)

Document Type

Working Paper

Date of this Version

2007

Comments

Chao, Li-Wei, Helena Szrek, Nuno Sousa Pereira and Mark V. Pauly. 2007. "Time Preference and Its Relationship with Age, Health, and Longevity Expectations." PARC Working Paper Series, WPS 07-05. This is a working paper that has now been published in Judgment and Decision Making, Vol. 4, No. 1, February 2009, pp. 1-19 and is available at http://journal.sjdm.org/8816/jdm8816.pdf

Abstract

Although theories in both evolutionary biology and economics predict that an individual’s health should be associated with the individual’s time preference, no prior study has been done to empirically support or refute such predictions. By collecting detailed measures of health, time preference, and expected longevity on a sample of individuals in townships around Durban, South Africa, this study breaks new ground by being the first to analyze in detail the relationship between time preference and health, in an area of the world with high mortality and morbidity. Interestingly, we find that both physical health and expectations of longevity have a U-shaped relationship with the person’s subjective discount rate. This suggests that those in very poor health have high discount rates, but those in very good health also have high discount rates. Similarly those with longevity expectations on the extremes have high discount rates. The research question addressed by this pilot project is policy relevant, as the study tries to determine the importance of health in economic development, not from the commonly asserted productivity-gain argument, but from a much broader investment-for-the-future argument.